'Paraffin mafia' firms given £500m fines for price-fixing

Wednesday 1 October 2008 19.01 EDT
First published on Wednesday 1 October 2008 19.01 EDT

A fine of more than £500m has been slapped on a group of leading energy companies including ExxonMobil and npower's parent, RWE, after the whistle was blown on a price-fixing cartel by Shell.

The penalty, one of the highest cartel fines imposed by the European commission, resulted from secret meetings which began at a saloon bar in Germany. This led to the fixing of prices and markets for everyday products containing paraffin wax such as chewing gum, tyres and candles.

Neelie Kroes, the European commissioner for competition, said the leader of the "paraffin mafia" was South Africa's Sasol but it included other leading oil companies. "I hope the harsh lesson of these high fines will encourage the management of these companies to look very carefully at what their staff is doing," said Kroes. "And I hope that in turn the shareholders of these companies look very carefully at the management."

The European market for paraffin wax totals about €500m (£397m) a year and the cartel covered about three-quarters of that between 1992 and 2005, added Kroes.

The companies had shown a common resolve to rig the market when they started meeting in Hamburg's Blauer Salon under the code-name "the Blue Saloon group".

Meetings followed all over Europe as the cartel developed, but Shell began informing the commission about the illegal practices after discovering the role being played by DEA, a subsidiary it acquired from RWE in 2002. A Shell spokeswoman in London said last night it had been "disappointed" to uncover the market abuse while the commission said the Anglo-Dutch group's cooperation had helped it avoid a potential €96m fine.

The other companies involved can appeal, and Sasol said it intended to. "Sasol is surprised by, and does not understand, the reasons for the magnitude of this fine and will be studying the reasons for the finding with a view to an appeal," it said. ExxonMobil was uncertain on its course of action but said in a statement it "deeply regrets its involvement, although limited, in the infringement of competition laws through the participation of a few of the company's former employees".

France's Total was fined €128m and ExxonMobil €83.5m. Others penalised were Repsol of Spain, Italy's Eni, Tudapetrol, Hansen & Rosenthal and RWE, all of Germany, and Moll in Hungary.